Turmoil in Health Insurance Markets: What Can Be Done
John A. Graves, Ph.D.
11/2/2017
ACA Health Insurance Marketplaces
Facilitated coverage purchases for ~20 million people nationwide.
Two key functions
Extension of safety net via premium tax credits and cost-sharing reduction subsidies.
Backstop/alternative to employer-based health insurance system.
ACA Health Insurance Marketplaces
A Wild Ride …
Difficulties structuring and pricing plans initially due to concurrent ACA regulatory reforms.
Surge in insurer participation in 2015, followed by signficant retrenchment starting in 2016.
Significant undertow from political environment & legal challenges.
Yet here we are, still limping along…
All markets have at least one insurer.
To the extent we have seen plan entry, it is largely to fill “bare” counties and some entry among innovative startups (Oscar, Bright Health, etc.).
A Wild Ride …
Marketplace insurer participation in Nashville, Tennessee
A Wild Ride …
Marketplace insurer participation in Birmingham, Alabama
Where we are
Function as an extension of safety net remains largely in tact, and arguably improved by CSR decision
For many enrollees, premium hikes mean a larger federal tax credit.
Map shows areas where a 40 year-old earning $40k/year could buy a plan for <$100/month in 2017 vs. 2018.
Where we are
Certain insurers have done okay, even fairly well (Garthwaite and Graves NEJM 2017).
Given profile of low-income marketplace consumers, plans with experience in Medicaid Managed Care have done relatively better.
Exiting plans had higher premiums and narrower networks, and less direct experience with risk-bearing contracts in local market.
Where we aren’t
Marketplace function as replacement/alternative to employer-based insurance largely nonexistent.
The rate at which (mostly young) people become uninsured after losing employer-based coverage is unchanged (Graves and Nikpay 2017).
This may not get any better given premium hikes and CSR nonpayment issue.
This really won’t get any better given Executive Order allowing greater proliferation of risk-rated association and short-term plans.
Where we’re going
Premium rate hikes mean that unless subsidized, premium affordability out of reach.
Despite tumultuous few years, notable dimensions of innovation: provider network design, telemedicine (Oscar).
Group Plan Primary Care Physician Networks in Nashville, Tennessee
Orange nodes: primary care physicians
Blue nodes: Insurers (United and Cigna)
Marketplace Plan Primary Care Physician Networks in Sheboygan, Wisconsin
Why Does this Matter?
Competition in the marketplaces means people are shopping around & switching plans.
16% of nonelderly US population changes their primary source of insurance in a given year. (Graves and Nikpay 2017)
203% increase in PCP spending when people change private plans (Barnett et al. 2017)
Cost savings from narrow networks only among people who keep their PCP (Gruber and McKnight 2016).
Wrapping Up
The long-term success of the marketplaces means allowing it to function as a backstop to the employer-based health insurance system.
An obvious and lazy solution is to adopt policies that lower premiums for current plans.
Transitionally uninsured aren’t flooding into marketplace plans. Why? Is the answer short-term plans, or copper plans?
Narrow networks have been tried, but alone aren’t the answer.
“Failed” marketplace plans had narrower networks (Polsky et al. 2017, Garthwaite and Graves 2017)
Switching carries costs in terms of both utilization and access.
Provider & insurance churn dilutes incentives to invest in services with longer-term benefits.
To foster competition & growth in marketplaces, need to rethink our regulatory approach in an era of narrow networks & telemedicine: network accuracy and consumer information.
